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If your goal is to have a
well diversified mix of
assets, ETFs let you do this simply and cheaply. No need to trust
anyone's stock picks either. Of course, you'll miss out on the
stock-specific gains, but you'll also miss out on the stock-specific
losses. For many investors, that's a worthwhile tradeoff.
Create a portfolio
and paper trade using my step-by step instructions and investment
guidelines. And when you get comfortable, open an account and reap
the benefits of self-directing your investments. It's easy and you
will appreciate to have taken your financial future into you own
hands - I know, I did!
Don't swing for the
fences or put it all on red. Never, ever let one trade
determine your profit and loss for the year, don't put your capital at
risk. In most cases, margin should be avoided and “doubling down” a
bad trade is a sucker's bet. Most times it just pays to take the loss
and move on. The good thing about being a trader is that every day
there are new opportunities to make money. Just make sure you can stay
in the game.
When the market is bad, it's time to be more
cautious. It sounds obvious, but when the market is below
key moving averages, unless that trade looks really enticing, it is
probably better to sit on your hands.
Most times you won't find the perfect entry
or exit, so don't worry about it. Many traders waste too
much energy looking for that perfect trade. What I like to do is
“partial buy and partial sell,” that is, when a stock looks good, buy
some and you can average up and down as warranted. When you have a
gain, you can take profits on the way up or down likewise.
Keep your emotions in check. Don't
get too up when things are going well and too down when you hit a bad
streak. If trading were easy, it would be called winning, not trading.
It's important to keep your emotions in check on a daily basis to
grind it out longer term.
Don't get caught up in guruism or CNBCitis.
We all like to both hear and give predictions and prognostications
about next week, next month, next year or next decade, but that doesn't help the
trader make money. All it does is possibly freeze your decision-making
process when there is a trade to be made. The market will tell you
when to be bullish or bearish, not some loudmouth in the media.
Invest for success. Anything that
can lead you to trade better is vital. Trading is hard enough with all
the proper tools at your disposal. Buy a comfortable chair, get as
many screens as you need, buy enough memory for that computer, deal
with a reliable online brokerage firm, and occasionally review my
investment strategy and maybe refine it to meet your trading
preferences.
Take breaks. Trading is very
stressful on both the body and mind. Sitting in one place staring at
six screens for hours on end is not easy on the eyes or back, so take
frequent walks and stretch. It's also good sometimes just to get away
from trading for a while to rejuvenate yourself, so don't be afraid to
take that vacation. The market will be there when you get back.
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